T.C. Memo. 1996-69
UNITED STATES TAX COURT
NANCY SILVERMAN AND ESTATE OF SHELDON SILVERMAN,
DECEASED, NANCY SILVERMAN, EXECUTRIX, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20324-89. Filed February 20, 1996.
H invested $100,000 in an arrangement, as a result of
which a $1,600,000 Schedule C deduction was claimed on the
1981 tax return. W did not see or sign this tax return, but
the parties agree that it was a joint tax return. As a
result of H's income tax withholding and excess F.I.C.A.
withholding, H's and W's 1981 joint tax return reported
payments of $128,733, all of which was claimed as a refund.
In September 1982 respondent (R) refunded $74,360.39 plus
interest by check, which H deposited in one of his
individual checking accounts, and quickly spent. At the
same time, R transferred the remaining $54,372.61 of 1981
payments to H's and W's 1980 tax liability account, leaving
a zero balance in the 1980 tax liability account. H died in
1986, and his estate was insolvent. Later in 1986, W filed
claims for refund of 1979, 1980, and 1981 taxes, on account
of net operating loss carrybacks from 1982. (A similar
$1,600,000 Schedule C deduction had been taken on H's and
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